Apple Stock PT, iPhone ASP Cut Before iPhone 7

When it comes to Apple stock, the story from analysts is pretty much the same: don’t expect much from the iPhone 7. In fact, it seems that the iPhone SE is being received better than many expected due to its small size, while the iPhone 7 could disappoint, particularly thanks to reports about next year’s model (the iPhone 8?) being so much better than the iPhone 7.

Now another firm has released the results of yet another survey on iPhone demand. Although the survey seems to suggest good things for unit numbers, it’s another sign that the average selling price might disappoint. As a result, the firm has cut its price target for Apple.

iPhone 7 to return Apple to growth

Canaccord Genuity analyst Michael Walkley reiterated his Buy rating but slashed his price target on Apple stock from $130 to $120 per share in a report dated June 22. His recent survey suggests that consumers are still putting off buying new iPhones before the iPhone 7 is released in the fall. Despite this, the survey also suggested that total sales appear steady as a result of more promotions and a mix shift toward the less expensive iPhone SE. Apple is finally starting to catch up with stronger-than-expected demand for the iPhone SE as ship times are finally starting to shrink.

Walkley expects the iPhone 7 cycle to bring “modest” improvements in upgrades compared to the iPhone 6s, bringing Apple’s flagship product back to growth after its first-ever year of declines. However, he cut his replacement rate estimate for the iPhone 7 cycle from 29.1% to 28.4% because the iPhone 7 is expected to be a smaller upgrade along the lines of past S model years. He also cut his fiscal 2017 iPhone estimates from 230 million to 222 million units.

The analyst also slashed his estimates for the iPhone average selling price for this year and next year due to what appears to be a higher mix of the iPhone SE and “modest” iPhone 7 expectations. He also pointed out that sales trends for Chinese smartphone manufacturers during the June quarter have been strong. Additionally, he said the His fiscal 2016 ASP estimate moves from $653 to $651, while his 2017 estimate moves from $637 to $627.

Better things in store for iPhone 8?

For next year’s iPhone, which most expect to be the iPhone 8 rather than the iPhone 7s, Walkley expects an OLED display. He believes an OLED screen would trigger a stronger replacement cycle for the iPhone 8, but it sounds like Apple may have even more in store for next year’s iPhone than what he expects.

According to Forbes contributor Gordon Kelly, well-connected industry insider John Gruber revealed some details about the 2017 iPhone on his podcast. He said the display will go from edge to edge and that the phone will lack bezels and the physical home button. Gruber also said the Touch ID sensor and front-facing camera will be embedded right in the display, as will the speaker and all of the sensors. This description seems to be in line with what The Wall Street Journal quoted design chief Jony Ive as saying, which is that he wants the iPhone to look like a “single sheet of glass.”

LG demonstrated just a couple of weeks ago that it can embed a fingerprint scanner right in a display, so we know that such technology is possible. As to why Apple is saving it for next year, Kelly suggests that the company wants something huge for the 10-year anniversary of the iPhone, and such a radical display change and souped-up technology would be perfect.

We would add that Apple often takes extra time to polish up new technology before offering it to the masses, so perhaps it needs an extra year to make sure that it’s ready, both for consumers and for the assembly line. After all, if the iPhone really does have so many new features, it will undoubtedly be in high demand, and if Apple’s suppliers can’t produce high enough yields, it may take quite a while for them to catch up with demand.

Shares of Apple stock edged higher by as much as 0.09% to $95.64 during regular trading hours on Thursday.